Ascendant profits sink 57.6%
Ascendant Group Ltd reported yesterday 2013 profits were down 57.6 percent last year as electricity sales tumbled.
After the 3.2 percent fall in kiloWatt hours sold in 2013, electricity provider Belco, a subsisdiary of Ascendant, has now seen electricity sales slide 10.6 percent since their 2009 peak.
Ascendant is an energy and infrastructure provider through its wholly owned subsidiaries Bermuda Electric Light Company Limited (Belco), Bermuda Gas & Utility Company Ltd and AG Holdings Ltd.
Ascendant’s report, released by the Bermuda Stock Exchange, highlighted a number of financial issues (see sidebar) faced by Belco including:
— A $2.4 million liability for overbilling.
— Pension plan costs at $2.6 million compared to $574,200 over the previous year.
— A future healthcare costs expense of $1.1 million.
— A $500,000 provision in regard to settling a software licensing dispute.
— Decrease in fuel adjustment revenue of $8.3 million.
Ascendant stated: “On 18 March 2014, the company’s Board of Directors announced a full review of Ascendant Group’s dividend policy, as the company seeks to balance the deployment of its capital to support significant reinvestment required for the next generation of electricity infrastructure. The review is taking place in consideration of the difficult economic conditions in Bermuda and the associated challenges.
“The continuing impact of the challenging Bermuda economy on revenues, coupled with energy conservation by customers and significant increases in costs incurred to maintain ageing equipment, pension expense and rising healthcare costs, had a substantial impact on Belco’s earnings. In addition, metering issues discovered during the year had a significant negative effect on the company’s electricity revenues.
“The combination of the economy and competition resulted in declines in Bermuda Gas’ sales and related earnings in the current year, while improvement in AG Holdings’ results was largely attributed to improved earnings of Air Care Ltd with 12 months of that company’s results being recognised in 2013, compared to seven months in 2012, as it was acquired in late May 2012.”
Ascendant reported Belco’s net income fell $7.6 million to $5.6 million for the year, as compared to 2012 net income results of $13.2 million. Sales of electricity net of fuel adjustment for 2013 totalled $143.3 million, a decrease of $2.1 million versus $145.4 million in 2012. BELCO’s kWh sales declined 19.6 million kWh, or 3.2 percent, from 606.3 kWh sold in 2012 to 586.7 million kWh sold in 2013. Belco’s electric sales have declined 69.4 million kWh, or 10.6 percent, since reaching a peak of 656.1 million kWh in 2009.
Bermuda Gas’ net earnings decreased $877,789, or 62 percent, to $535,671 in 2013 from $1.4 million in 2012, due to reduced gas sales, as a result of both the challenging economic conditions and competition. Its parent company said the decline in gas sales was offset to some extent by cost control, increasing appliance sales and improving efficiencies in the Service and Parts Department.
AG Holdings, established in October 2012, manages Ascendant Group’s non-utility business operations: Air Care, iEPC Ltd, iFM Ltd, PureNERGY Renewables, Ltd, and Ascendant Properties Ltd, and its 2013 net earnings were $3.1 million, representing an improvement of $2.7 million, or 622 percent, versus $427,676 in 2012.
The primary reason for the increase in current year results is attributed to the company’s investment in Air Care. In late May 2012, the company acquired a majority investment in Air Care, which earned $717,063 for the seven-month period ended 31 December 2012, of which $451,779 is attributable to Ascendant Group shareholders.
For the 12 months ended 31 December 2013, Air Care earned $3.3 million, of which $2.6 million is attributable to Ascendant Group shareholders.
Ascendant reported consolidated earnings for the year ended December 31, 2013 of $4.9 million, or $0.39 per share, compared to $11.5 million, or $1.07 per common share, for the same period in 2012 — a decrease of $6.6 million or 57.6 percent
And Ascendant also stated: “Book value per share declined 1.8 percent to $30.62 in 2013 versus $31.18 per share in 2012. This was due to the dilutive effect of 120,349 new shares issued during the year and the payment of dividends in excess of net earnings.
The report concluded: “The combination of the economy and competition resulted in declines in Bermuda Gas’ sales and related earnings in the current year, while improvement in AG Holdings’ results was largely attributed to improved earnings of Air Care Ltd with 12 months of that company’s results being recognised in 2013, compared to seven months in 2012, as it was acquired in late May 2012.”
Useful website: www.ascendantgroup.bm
Belco overcharged some commercial customers to the tune of $2.4 million last year, the company’s parent Ascendant Group acknowledged yesterday.
In an audit of demand and commercial meter installations, undertaken by Belco, the company also found that three customers had not been billed and others had been undercharged.
Ascendant said “operational and organisational changes have already been introduced by the company to prevent these types of issues from recurring”.
The release continued: “It is important to note also that the meter connection issues highlighted in both demand and commercial customer classes are not present in the residential metered customer class.”
The company added: “Based on 2013 actual findings and management’s best estimate of liability due to over-billing of both demand and commercial class customers, the company has reduced its revenue by $2.4 million and accrued a liability of that same amount as at 31 December 2013, for accounts that were overbilled.”
Fuel adjustment charge revenues in 2013 fell $8.3 million to $95.8 million from $104.1 million in 2012, due to a combination of lower fuel prices, reduced generation of electricity that resulted in lower kWh sales and an improvement in overall generation efficiency, Ascendant added.
The average price of fuel in 2013 was approximately $131.47 per barrel, as compared to $135.00 per barrel in 2012, which amounted to $3.3 million of fuel savings, it said, adding: “The decrease in kWh sales volume noted above is responsible for $3.2 million of the overall decrease, while an improvement in overall generation efficiency and a decrease of 2.7 million total kWh purchased from the Bermuda Government’s Tynes Bay waste-to-energy incinerator plant was responsible for the balance of the total decrease in fuel costs. The company does not incur any profit or loss on fuel adjustment; hence, this revenue is offset by identical fuel costs reflected in operating and administrative expenses.”
Ascendant said total operating expenses, including fuel costs, had decreased $7.2 million in 2013 to $243.5 million, compared to $250.7 million in 2012, largely due to the decrease in fuel costs.
Ascendant added that the decrease in fuel costs was offset by large increases in several expense items.
These included costs incurred for the company’s Defined Benefit Pension Plan, which rose to $2.6 million in 2013, compared to $574,200 in 2012, “due to a change in investment policy to better match the plan’s assets with future liabilities”. Management is “currently considering additional options to further mitigate the risk of the plan on the company’s financial position”.
The requirement to recognise expected future healthcare costs resulted in an expense of approximately $1.1 million in 2013 versus 2012, due to a change in actuarial assumptions.
“The company established a provision and incurred an expense of $500,000 for the likely settlement of a contingent liability stemming from a dispute with a software vendor over end-user licence fees associated with the implementation of that vendor’s system in 2012,” Ascendant added.
